All three major U.S. credit reporting agencies are now offering a new FICO score from Fair Isaac Corp. that’s specifically designed for prescreening, originating and servicing mortgages, the company said.
The FICO 8 Mortgage Score does a better job identifying accounts that are overdue by 90 days or more, pushing more high-risk borrowers into lower score ranges, the company says in promotional materials.
The FICO 8 Mortgage Score uses the same 300-850 scoring range as the all-industry FICO score most widely used, but is better at predicting whether a borrower will default on a mortgage, the company says.
The score can be used not only by mortgage originators to assist in underwriting decisions, but by loan servicers to spot borrowers who may be at risk of foreclosure.
Consumers without a mortgage or home equity line of credit (HELOC) can be scored using "mortgage-related characteristics" determined by analyzing the credit histories of consumers with mortgages.
The FICO Mortgage Score provides additional reason codes that help lenders understand and explain the scores to applicants as required by the Fair Credit Reporting Act.
FICO 8 Mortgage Scores can be used in conjunction with the FICO Economic Impact Service, which helps lenders tighten or loosen credit policies ahead of ups and downs in the economy based on forward-looking modeling.
A recent analysis by Zillow showed most Americans have credit scores that are too low for them to qualify for the best rates on a mortgage, and nearly one in three are unlikely to get a loan on any terms.
